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Technology Stocks : All About Sun Microsystems -- Ignore unavailable to you. Want to Upgrade?

To: Sonki who wrote (11809)	11/19/1998 12:44:00 PM
From: KM	Read Replies (4) \| Respond to of 64865

All: Check This Out Top Stories: Go Figure: Sun Microsystems Still Has Some Legs By Eric Moskowitz Staff Reporter 11/19/98 12:25 PM ET Investors may be cursing themselves for missing out on the run of Sun Microsystems (SUNW:Nasdaq), which has shot up 50% since the tech stocks bottomed Oct. 8. But the party may not be over: According to technical analysts, Sun still has plenty of room to run. "Sun has recently entered a new range after being in a horizontal trading range all year," says Doug Fairclough, chief investment strategist and founder of Clearstation.com, who points out that Sun traded between 40 and 55 through October. "Since then, it's been moving vertically." Indeed, on Wednesday Sun closed at 66 5/8. But is the Sun story as bullish as its chart? Price/Volume Graphs Opening 50-Day EMA Trending 13-Day EMA Price Bar Up-Day Volume Price High Down-Day Volume MACD Trending Slow Signal Fast Line MACD Histogram Stochastic Copyright 1998 ClearStation Inc., All Rights Reserved The story certainly got some support Tuesday. A federal judge in California forced Microsoft (MSFT:Nasdaq) to stop selling its version of Sun's Java programming language and start selling Sun's Java instead. This is great news for Sun, though the immediate effect on earnings will be minimal. Sun has been relying on earnings from products in the server and workstation market more than Java earnings. If this preliminary ruling stands, Sun's take from licensing Java to the dominant Wintel market could push the company to a more Microsoft-like price-to-earnings multiple. Currently, its forward P/E of 25 (based on analyst consensus estimates of $2.77 a share for the current fiscal year, which ends in June 1999) is only about half of Microsoft's P/E ratio of 47 for the same fiscal year. Sun also has benefited from the failure of other companies to execute properly. "Sun is clearly being helped by delays in Microsoft's Windows 2000 and Intel's (INTC:Nasdaq) Merced chip," says Jeff Maxick, director of research with Chicago-based Madison Securities. Although Sun's relative valuation has gone up with its recent stock rise, "I still don't see what is going to slow them down," says Jeff Matthews, a money manager with Ram Partners. "The failures in Hewlett-Packard's (HWP:NYSE) server business and the dislocation at Compaq (CPQ:NYSE) make company analysts still very optimistic about Sun." Recent deals with NCR (NCR:NYSE), Amdahl, Fujitsu and Toshiba make Sun's Solaris a "winner" and the "high-class" server solution, according to Morgan Stanley Dean Witter's Thomas Kraemer. Even as the launch of Windows 2000 approaches, Kraemer -- who has a strong buy on the stock -- noted recently that Sun's Solaris servers should continue to be the No. 1 choice for chief information officers at Fortune 500 companies. (Morgan Stanley hasn't participated in any of Sun's recent offerings.) In a recent conference call with analysts, Sun, which now has a $26 billion market cap, stressed that its technology edge would continue in such potentially lucrative growth areas as network computing, electronic commerce and the Internet. Its Starfire product line in the high-end server business has propelled Sun to a 7% share in this market, up from almost nothing 18 months ago, according to Amit Chopra, an analyst with Credit Suisse First Boston. "The Starfire product line has been the major driver of Sun's success," says Chopra, who has a hold rating on the stock. (CS First Boston doesn't have an underwriting relationship with Sun.) Bullish analysts have been bumping up estimates on the Palo Alto, Calif.-based outfit based on the stellar first fiscal quarter the company posted in October. Sun reported a 22% jump in year-over-year earnings and a 19% increase in year-over-year revenue. In its last fiscal year, Sun recorded only a 14% increase in revenue. Suddenly, after four years of decelerating revenue growth (from 26% to 14%), the company seems to be finding new growth streams. A quick glance at Sun's chart might not suggest more stock-price growth is on the way. A week ago Sun topped out at 65, then quickly fell to 60, a sign that 65 could be the top of the stock's new trading range. But Fairclough argued that it wasn't. The recent dip, he explained, had been accompanied by an equally sharp drop-off in trading volume. "If the volume was staying high when it was correcting, it would have been a much bigger question mark," said Fairclough, who looks at trading volume, 13- and 50-day moving averages and trending data to compile recommended stock lists. As if on cue, Sun's stock powered through the 65 ceiling this week to a record high on Wednesday. It was up 7/8 at 67 1/2 at midday Thursday. "We think there is more to come," says Morgan Stanley's Kraemer. So does Clearstation.com.